The Tierras Morenas Windfarm Project involves the construction and operation of a privately owned and
operated 20 megawatt (MW) wind facility near the town of Tierras Morenas in the Guanacaste province of
Costa Rica. Electricity generated by the plant will be sold to the Costa Rican Institute of Electricity
(ICE) to meet a portion of Costa Rica's energy demand. Because this generation will displace
electricity that would have otherwise been generated by existing thermal plants, it will reduce greenhouse
gas (GHG) emissions from fossil fuel combustion. The facility is anticipated to be operational in June
1998, and is expected to produce an estimated 76 gigawatthours (GWh) of electricity per year.

Contact Person for AIJ Activities (if different from the Administrative Officer)

Surname

First name, middle name

Job title

Direct telephone

Direct fax

Direct e-mail

5. Description of AIJ project activities

Item

Type of Project

Sector(s)

Energy

Primary activity(ies)

Alternative energy generation (wind)

Project Location

Country

Costa Rica

Exact location (city, state, region)

On the Cerro Barrera ridge, approximately 4 km northwest of the village of Tierras Morenas, and
approximately 10 km northwest of the town of Tilarán, in the Guanacaste province.

Key Dates and Current Stage of Project

Project starting date (month/year)

September 1997

Project ending date (month/year)

July 2011

Project lifetime (years)

13 years, 11 months (with possible 5-year extensions to the contract)

Current stage of project

Mutually agreed

General Project Description and Technical Data

The Tierras Morenas Windfarm Project involves the construction and operation of a privately owned
and operated 20 MW wind facility near the town of Tierras Morenas in the Guanacaste province of
Costa Rica. Electricity generated by the plant will be sold to the Costa Rican Institute of
Electricity (ICE) to meet a portion of Costa Rica's energy demand. Because this generation will
displace electricity that would have otherwise been generated by existing thermal plants that burn
primarily high-sulfur diesel fuel, fuel oil, and IFO 180 fuel, it will reduce GHG emissions from
fossil fuel combustion.

The Tierras Morenas Power Plant will consist of 33 Nordtank NTK 600/43 Wind Turbine Generators
(WTGs), transmission facilities, a control room, transformers, collection lines, and transmission
lines for interconnection with the National Interconnected System (SNI). Each turbine has a
dedicated 500/600 KVA, 34.5 KV, 400 volt pad mounted transformer adjacent to the tower. The plant
is expected to produce an estimated 76 GWh of electricity per year.

6. Cost

(a) Explanation of methodology for calculating cost data

Methodology for Calculating Cost Data

Project implementation costs are separated into two categories, facility costs and non-facility
costs. The estimated facility cost is US$25,000,000, and includes: the wind turbine generator,
towers, blades, balance of plant items, (e.g., transformers, on-site transmission and communication
cables), site improvements, (e.g., roads and security), plant design and installation, transmission
and interconnection infrastructure, and costs associated with land obligations. Non-facility costs
are estimated to be US$6,500,000, and include: legal fees, including site leases, construction
contracts, financing documents, insurance contracts and other legal counsel; site procurement
costs, including identifying land owner, performing site surveys, performing wind monitoring;
financing fees, including required payments to financing institutions for due diligence and
transaction costs, interest payment during construction; taxes, such as port fees, shipping, etc.;
third party expenses such as costs spent for consultants, advisors, etc.; freight/transportation of
equipment; and miscellaneous costs.

Facility costs were estimated to be approximately US$1,759 per kilowatt (kW), and the annual
operating cost of the project is estimated to be US$1,100,000. Operational costs are estimated to
be US$0.015 per kilowatt hour (kWh).

(b) Cost data–Project development

This information is not yet available.

(c) Cost data–Project implementation

Itemized Project Implementation Costs

7. Monitoring and verification of AIJ project activities and results

Item

Party(ies) that will be monitoring project activities

Ministry of Environment and Energy (MINAE)

Party(ies) that will be externally verifying project results

This information is not yet available.

Date when the monitoring plan became (or will become) operational (month/year)

This information is not yet available.

Types of data that will be collected

Fossil fuel use for electricity generation, by fuel type

Description of Monitoring and Verification Activities and Schedule for Implementation

Monitoring will take place on a regular basis in accordance with the power purchasing agreement.
The MINAE Office of Energy Policy will provide data annually on the amount of fossil fuel used to
generate electricity in Costa Rica. With technical assistance from MINAE and ICE, this data will be
used to develop a greenhouse gas displacement profile for the project.

The project participants are investigating the possibility of using an internationally recognized
environmental advocacy organization to verify the procedures and methodologies used. Information on
the monitoring and verification schedule is not yet available.

B. Governmental approval

Item

Please check one of the following.

This report is a first report.or

This report is an intermediate report.or

This report is a final report.

Please check one of the following:

This report is a joint report. Letter(s) of approval of this report from the designated national
authority of the other Party(ies) involved in the activity is(are) attached in Section J, Annex.or

This report is a separate report.

Additional comments (if any):

C. Compatibility with, and supportiveness of, national economic development and socioeconomic and
environmental priorities and strategies

Compatibility with Economic Development and Socioeconomic and Environmental Priorities

In his letter to the USIJI Evaluation Panel, the Minister of MIRENEM (now MINAE) noted that the
Tierras Morenas Project will help Costa Rica achieve its sustainable development goals by
diversifying its energy resource portfolio. The project will also help ICE meet a portion of the
country’s energy demand at a time when shortfalls in energy supply are expected.

MINAE has reviewed the entire design and construction program for this project, and an
Environmental Impact Report for the project has been approved by the Costa Rican Government.

D. Environmental, social/cultural, and economic impacts of the AIJ project

Non-Greenhouse-Gas Environmental Impacts of the Project

The project developers state that by displacing fossil fuel use, the Tierras Morenas project will
reduce air pollution in Costa Rica.

The developers also state that completion of the project will require various types of civil works
and physical adjustments to the project site. These will include improvements to access roads to
the project site, construction of roads adjacent to turbine strings to allow construction and
continued servicing of the turbines, clearing and grading for turbine foundations, trenching and
underground cabling for connecting the turbines, and construction of on-site buildings, maintenance
facilities, and site fencing. Because the landscape has already been altered and movement of land
will be moderate in scope, the overall impact is expected to be relatively small.

Social/Cultural Impacts of the Project

This information is not yet available.

Economic Impacts of the Project

The project will provide an important source of electricity at a time when energy demand is
continuing to increase in Costa Rica. The developers also indicate that the project will increase
employment and stimulate local commerce during both the construction and operation stages of the
project. The project also transfers modern, clean, efficient technology to Costa Rica with little
capital investment, and may attract additional foreign capital that would not have been available
otherwise.

E. Greenhouse gas impacts of the AIJ project

1. Scenario description

Item

Site Designation

Site number (order of presentation in this report)

1 of 1

Site name/designation

Tierras Morenas Wind Facility

Project sector

Energy

Reference Scenario

Primary activity(ies)

Electricity generation from fossil fuels

Has the reference scenario changed since the last report? (If yes, explain any changes below.)

Yes

No

This is the first project report.

Description:

The reference scenario describes projected national fossil fuel consumption for electricity
generation, in the absence of the project wind facility.

Thermal units in Costa Rica were originally designed to meet only peak demand, while hydroelectric
systems were intended to meet base load demand (hydro is preferred because it is half the cost of
thermal generation). However, decreased reliability of hydroelectric plants resulting from El
Niño drought conditions has forced ICE to rely more heavily on thermal units to meet base
load demand. At the same time, energy demand in Costa Rica is growing at a rate of between 7 and 9
percent annually. This rapid growth has put pressure on ICE to continue to expand its current
capacity. In September 1994, the Minister of MIRENEM announced the goal to meet all electricity
needs in Costa Rica with renewable energy sources by 2001. However, current energy demand and
supply conditions suggest that such a phase-out may be delayed.

In light of the ambiguities created by the drought and consequent decreased reliability of
hydroelectric power in Costa Rica, as well as potential conflicts between the government policy
goal to phase out fossil fuels and actual utility plans to expand fossil fuel capacity, the
proposal provides a broad picture of future GHG emissions in Costa Rica by presenting two sets of
reference case projections: one developed by ICE and USAID in 1992, and an "alternative"
projection incorporating 1994 fossil fuel consumption data and the September 1994 government policy
goal to phase-out fossil fuels. The "alternative" reference scenario is presented in this
report simply because it leads to a lower estimate of net project benefits and, hence, is more
conservative. This scenario is based on the assumption that consumption of diesel and fuel oil for
electricity generation in Costa Rica will remain at 1994 levels through 1997, and then decline to
zero by 2001.

Predicted Project Scenario

Primary activity(ies)

Alternative energy generation (wind)

Description:

The terrain at the project site is primarily rolling hills, open fields and ridgelines. The area is
currently used primarily for cattle grazing. Site vegetation consists mostly of field grass and
sporadic patches of trees.

GHG emission reductions will be achieved by displacing the emissions associated with fossil fuel
capacity that would otherwise be used to meet electricity demand. Although the project developer
estimates that the wind facility will be operational in 1997 and will function for more than 15
years, GHG reductions are projected only from inception through the year 2000. As explained in more
detail below, this approach was adopted to be consistent with the Costa Rican Government’s
goal of phasing out fossil fuels by the year 2001.

Actual Project

Primary activity(ies)

This information is not yet available.

Description:

This information is not yet available.

2. GHG emission/sequestration calculation methodology

GHG Emission/Sequestration Calculation Methodology

Site number

1 of 1

Project sector

Energy

Description of Calculation Methodology for the Reference Scenario

The reference case is based on historic and projected emissions from consumption of diesel and fuel
oil used to power Costa Rica’s generating plants. Using 1994 fossil fuel consumption data as
a benchmark and the fossil fuel phase-out plan, the proposal generates an "alternative"
reference scenario projection in which emissions fall to zero over the period from 1997 to 2001.
The reference scenario is based on emissions from the consumption of diesel and bunker fuel oil
used to power Costa Rica's fossil fuel generating plants,

which are currently operating almost full time. In 1994, fossil fuel plants generated 829.8 GWh,
and emitted 861,843 t CO2. Note that reference scenario emissions for Year 1 (1996) are
estimated as 3/12 of annual levels because Year 1 is defined as October to December 1996.

The proposal assumes that consumption of diesel and fuel oil will remain at 1994 levels until 1997.
This is fully consistent with the MIRENEM Minister's announced goal to phase out fossil fuel by
2001, according to which fossil fuel consumption is expected to decline beginning in 1998 until it
is totally eliminated by 2001. As the phase-out plan is implemented, emissions from fossil fuel
consumption are expected to be reduced by approximately 33 percent by 1998, 66 percent by 1999, 99
percent by 2000, and 100 percent by 2001, relative to 1994 levels.

Net project benefits are the avoided emissions from displaced fossil fuel generation. Beginning in
1998, net project benefits claimed are based on the ratio of the plant's projected electricity
generation (76 GWh) to annual fossil fuel electricity generation in Costa Rica for 1994 (829.8
GWh), multiplied by reference scenario emissions in that year. This is equivalent to deriving a
national emissions factor for fossil fuel plants (861,843 t CO2/829.8 GWh), and applying
it to the portion of the project’s annual generation that displaces fossil fuel generation.
Emission reductions decline annually until they reach zero in 2001 (based on annual percentage
decreases in fossil fuel use anticipated with the total phase-out of fossil fuel plants). By
calculating an annual reduction in net project carbon benefits based on the phase-out of fossil
fuels, the project attempts to avoid double-counting emission reductions that may be claimed by
other wind energy or hydroelectric projects in Costa Rica. Net emission reductions (net project
benefits) are calculated as follows:

YearNet Project Benefits

1 (September – December 1997) (0 t C)

2 (1998) (76 GWh / 829.8 GWh)(574,942 t CO2)(7/12)

3 (1999) (76 GWh / 829.8 GWh)(288,041 t CO2)

4 (2000) (76 GWh / 829.8 GWh)(1,138 t CO2)

5 (2001) (76 GWh / 829.8 GWh)(0 t CO2)

Emission reductions for 1998 have been prorated (multiplied by 7/12) to reflect the date at which
the facility was anticipated to come on-line (June 1998).

Description of Calculation Methodology for the Actual Project

This information is not yet available.

3. GHG emission/sequestration data

(a) Reporting of GHG emissions/sequestration

Projected Net Greenhouse Gas Benefits: All Project Sites

(Tonnes, Full Molecular Weight Basis)

Sector(s):

Energy

Project Activity(ies):

Alternative Energy Generation

Please specify: Year 1 =

September 1997 to December 1997

Reference Scenario Emissions

Project Scenario Emissions

Net GHG Benefits

(Reference Scenario - Project Scenario)

Cumulative GHG Benefits

(Reference Scenario - Project Scenario)

Year

CO2

CH4

N2O

CO2

CH4

N2O

CO2

CH4

N2O

CO2-

Equivalent

CO2

CH4

N2O

CO2-

Equivalent

1

287,281

287,281

0

0

0

0

2

574,942

544,224

30,717

30,717

30,717

30,717

3

288,041

261,659

26,381

26,381

57,098

57,098

4

1,138

1,033

104

104

57,203

57,203

5

0

0

0

0

57,203

57,203

6

0

0

0

0

57,203

57,203

7

0

0

0

0

57,203

57,203

8

0

0

0

0

57,203

57,203

9

0

0

0

0

57,203

57,203

10

0

0

0

0

57,203

57,203

11

0

0

0

0

57,203

57,203

12

0

0

0

0

57,203

57,203

13

0

0

0

0

57,203

57,203

14

0

0

0

0

57,203

57,203

Total

1,151,401

1,094,198

57,203

57,203

57,203

57,203

(b) Additional information on GHG emissions/sequestration

Indirect or Secondary GHG Impacts (Positive and Negative)

This information is not yet available.

Factors That Could Cause the Future Loss or Reversal of GHG Benefits

Given the nature of this project—substitution of fossil fuel generated power with
hydroelectric power— loss or reversal of benefits that have been achieved is not possible.

Strategy for Reducing the Risk of Future Loss or Reversal of GHG Benefits

This information is not yet available.

F. Funding of the AIJ project

1. Identification of funding sources

(a) Funding sources for project development

This information is not yet available.

(b) Funding sources for project implementation

Funding Source

Country of Funding Source

Amount

($US)

Percent of Total Funding

(%)

Is This Funding Assured? (Y/N)

Molinos de Viento Arenal S.A. (MVA)

Costa Rica

10,000,000

30

N

Commonwealth Development Corporation (CDC)

U.K.

7,500,000

24

N

International Finance Corporation (IFC)

U.S.A.

7,500,000

24

N

Other commercial banks

U.S.A./Europe

6,500,000

22

N

Total

31,500,000

100

2. Assessment of additional funding needs

Current or Planned Activities to Obtain Additional Funding

The project developers are planning to finance the full capitalized costs of the project with a
combination of debt and equity. The financing will be structured, as much as possible, as standard
limited/non-resource project financing. The split of debt and equity is expected to be
approximately 30 percent equity and 70 percent debt financing. This split is generally standard for
international energy financing of this variety.

The total amount of debt financing for the project is expected to be around US$22 million. The debt
portion is expected to come primarily from multilateral banks or larger multi-national commercial
banks. The project developers have begun to arrange financing with several institutions, including
the Commonwealth Development Corporation (CDC), the International Finance Corporation (IFC), and
other related financial institutions. The developers are also in discussions with various
commercial and investment banks regarding debt financing for the project.

G. Contribution to capacity building and technology transfer

Contribution to Capacity Building and Technology Transfer

The project will transfer state-of-the-art renewable energy technology to Costa Rica. In addition,
the implementation of the Tierras Morenas project is anticipated to lay the groundwork for the
development of future private-sector wind projects in Costa Rica.